KBRA Assigns AA Rating, Stable Outlook to City of Jacksonville, FL Special Revenue and Refunding Bonds, Series 2024
2 Aug 2024 | New York
KBRA assigns a long-term rating of AA to the City of Jacksonville Special Revenue and Refunding Bonds, Series 2024. Concurrently, KBRA affirms the long-term rating of AA rating on the City's outstanding Special Revenue Bonds.
The long-term rating of AA is also affirmed on the City's City's Special Revenue (BJP) Bonds, which are payable from Covenant Revenues and further payable from Infrastructure Sales Tax revenues available after satisfaction of the debt service and reserve account funding requirements of the City's Better Jacksonville Bonds.
The Outlook on all bonds is Stable.
Key Credit Considerations
The rating was assigned because of the following key credit considerations:
Credit Positives
- Covenant Revenues increased consistently from 2018-2023, albeit at a growth rate somewhat below the rate of inflation over the period.
- Strong anti-dilution test coverage of maximum annual debt service has been maintained throughout economic cycles. Anti-dilution test coverage has exceeded 4.22x since 2019 and was a strong 4.60x in FY 2023.
Credit Challenges
- Although the City is addressing high fixed costs through previously enacted pension reform measures and careful adherence to its own debt affordability metrics, required pension contributions and debt service obligations are expected to exert continued pressure on the operating budget.
- Additional Special Revenue Bonds are planned to finance the debt funded component of City’s large and growing Capital Improvement Plan. The CIP includes approximately $625 million of costs related to the City’s share of construction costs of the renovated Jaguars Stadium.
- Essential governmental services are statutorily prioritized over debt service on the Special Revenue Bonds.
Rating Sensitivities
For Upgrade
- Achievement of reduced pension funding requirements, sustained decline in pension costs and improved operating flexibility, as anticipated to begin in 2031 when Pension Liability Surtax revenues are expected to flow to the pension system.
- Improvement in wealth indicators, which trail State and national averages.
For Downgrade
- An increase in operating expenditures and/or decline in General Fund revenues that results in a material deterioration of Covenant Revenues relative to Special Revenue Bond debt service.
To access rating and relevant documents, click here.